Two thoughts on cars today.
1. 36 billion wasted without a word. While we all piddle, twiddle, and resolve (but not one damn thing do we solve) this 700 billion dollar megacheck in the financial sector, a tiny, inconsequential mosquito of money, 36 billion dollars, has quietly slipped through our fingers unnoticed. At any other time, when the markets were strong and eyes were not on the mortgage crisis, there would be hue and cry up and down the Capitol Mall as lobbyists from Detriot quietly greased palms last week and convinced the House to add a
25 billion dollar bailout to their current tax break legislation. A similar measure is expected to pass next week in the Senate.
The automakers begging for scraps, namely Ford, GM, and Chrysler, are claiming they are desperate for the money because they have no capital with which to retool their factories for hybrid car production. GM plans to use it's allotment to build an engine building factory for its new Chevy Volt, "due" in 2010.
There are several obscenely offensive problems with this concept. First and foremost, is the complaint that without this money, these companies cannot afford to change from their gas-guzzling, 4-wheel drive, 8-cylinder SUV's to compact, lightweight 4-cylinder cars.
Because suddenly they feel like they should...when since 1999 it's been much easier to just lobby Washington to not tighten emissions restrictions. Instead of spending the last 10 years developing new technologies (or God forbid) buying it from the Japanese (who were desperate to export the technology in the late 90's), they now suddenly feel that their only method of survival is to convert from their SUV production (which has stranded millions of SUV's on dealership lots) to compact car production.
The second problem with this is that they believe they need this funding in order to meet the Washington requirement that mpg standards increase by 15% in the next 7 years, and 30% by 2020. This is the part where I mention that Honda, Toyota, and Hyundai all have committed themselves to meeting the 30% increase in mpg...with existing cars...before the 15% deadline comes...with no increase in vehicle cost...and no cost to the taxpayer. But in order for GM and Ford to do it, they need $25 billion out of taxpayer pockets. Did I mention GM is currently lobbying the government to release these restrictions?
There are only 535 people in the entire world dumb enough to think that Korean engineers are capable of meeting a technical standard that American engineers cannot. Unfortunately for the American people, those 535 people are the members of the United States Congress.
Third: GM and Ford cars and trucks are made almost entirely with parts that are created in overseas factories and brought to the USA and assembled here. Toyota builds most of their American cars using American parts made in American factories. The cars are assembled in an American plant by American workers. The reason they do this is because foreign owned companies are tariffed to the hilt to ship
anything on the car into the States, while U.S. owned car companies can pluck foreign parts up here and there and bring them in to the states with no penalty, given they assemble the cars here.
2. A credit collapse = much, much cheaper, smaller, more fuel efficient cars.
Dave Ramsey, author of the popular book
Total Money Makeover suggested yesterday that America should force itself into a credit collapse. Let the mortgage companies, investment banks, and associated brokerages collapse, he says, and credit will become extremely difficult to obtain. Home loans, car loans, student loans, and credit cards will suddenly become a luxury only those with a credit rating near perfect will be able to obtain.
Of course, this is ridiculous, our country is addicted to credit, and my generation is the Debt Generation, we couldn't operate for very long without our debit and credit cards.
But it is an interesting idea. Ramsey takes the extreme view of debt, to the point where he says if you don't have the income to pay cash for a college education then you save up until you can. By forcing us to stop using credit (because it is no longer available to the masses), we would free ourselves from this downward debt spiral we seem to be stuck in.
Nevertheless, less than ten thousand people in this country can probably afford to pay cash for a home.
An interesting side-effect of Ramsey's plan would be that we could no longer afford 60-month loans on $35,000 cars. Tata motors, an Indian company who parents Land Rover and Jaguar, plans to start selling a $2,500 dollar, 62 mpg, 2-cylinder, 4-door car called
the Nano, which travels around 200 miles on 4 gallons of 87 octane gas.
If I was unable to get the financing I did for my Honda CR-V, in fact if I were unable to get financed for
anything, then my only alternative would probably be to save for a couple months then buy a
Nano, which is the only car cheap enough to be bought with cash.
What a strange world it'd be, if all of a sudden we all stopped driving excessively-powerful, excessively-large, excessively-inefficient mega cars and we all piled into these tiny little gas sippers and zipped around town at a max speed of 64 mph. If we all switched over to them tonight, we would be completely free of Persian Gulf oil...
tonight.Wait. Hold the phone. If there are about 350 million Americans...and 43% of them have valid driver's licenses...and the government is giving Wall Street 700 Billion dollars...that's 700 billion divided by 150 million...that's dollars a person. That's roughly $4,500 dollars a person.
Why doesn't the government, instead of bailing out Wall Street (again and again and again) instead buy every driver a Nano and single-handedly end our dependence on foreign oil?!
Not to mention the $25 billion the taxpayers would save when they collectively said "I already have a Nano, I don't need a Chevy, thanks, but no thanks."
